Information asymmetry can be found in a typical product or job market in Canada. Sellers may know more about the quality and safety of a product than the buyers. Similarly, an employer may know more about the working conditions and job-related health risks than their workers.

(i) Use an appropriate demand and supply diagram to show and explain two important effects of information asymmetry in a product market which suggests the rationale for government intervention.

(ii) Under what circumstances, the benefits of government intervention are likely to exceed the costs? Explain.